Microfinance Lending Declines, Quality Rises

• Microfinance portfolio shrinks 16.5% YoY to Rs 3.45 lakh crore as of September 2025.
• Active loans decrease 19.3% YoY, yet disbursements rise 6.5% to Rs 60,900 crore.
• Improvement in asset quality noted, with unpaid dues falling across various time frames.

Mumbai: The microfinance portfolio for all lenders continued to shrink even in the September quarter, but there was an improvement in asset quality, a report said on Tuesday.The gross lending portfolio of microloans

dropped 16.5 per cent to Rs 3.45 lakh crore as of September 30, 2025 as against Rs 4.14 lakh crore in the year-ago period, and was 3.8 per cent down from the Rs 3.59 lakh crore in the June quarter, the report by a credit information company said.

The number of active loans to borrowers at the bottom of the pyramid declined 19.3 per cent on-year and 6.3 per cent on-quarter to 12.4 crore as of September, Crif High Mark said.However, the amount disbursed during the July-September period increased to Rs 60,900 crore, up 6.5 per cent from Rs 57,168 crore in the quarter-ago period.

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Loans in the Rs 50,000-1 lakh segment accounted for the majority of disbursements, while loans above Rs 1 lakh doubled their share on-year to 15 per cent, driven largely by banks and NBFCs.On the asset quality front, troubles on this front have led lenders to be cautious over the last few quarters, there was an improvement, the report said.It can be noted that the industry has adopted a slew of measures, including capping the number of entities that can lend to a borrower.

Borrower exposure to up to three lenders rose to 91.2 per cent in September 2025 from 83.1 per cent in the year-ago period, it said, adding that this reflects an adherence to the guardrails cap.Dues unpaid for up to 30 days reduced to 1.41 per cent from 1.56 per cent in the quarter-ago and 2.12 per cent in the year-ago period, while the ones unpaid for between 31-90 days were down to 1.84 per cent from 2.40 per cent and 2.45 per cent, respectively, it said.

"The microfinance sector continues to demonstrate its resilience, with lenders showing prudence in customer selection and credit underwriting. The steady rise in ticket sizes and increased lending to experienced borrowers reflect a maturing credit ecosystem that is balancing growth with sustainability," the company's Chairman Sachin Seth said. 

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